Gianluca Benigno notes that the NY Fed’s GSCPI, used in this post on using a naive expectations augmented Phillips curve to predict inflation, can be used independently to predict inflation, as in Akinci, et al. “How much can GSCPI improvement help reduce inflation” (Feb 2023).
Author Archives: Menzie Chinn
How Well Do Adaptive Inflation Expectations Do, 1982-2023?
Answer: so-so.
Reader Erik Poole commenting on this figure (in this post) writes:
Assuming that the all the inflation forecasts are one-year forecasts in the above chart, do we have any kind of inflation expectations data for shorter time frames, such as 6 months?
The above is a fancy way of asking: are financial markets and professional forecastersb really that bad at forecasting inflation?
Glancing at the above chart, it appears to make a good argument for adaptive expectations driving economic agents inflation expectations.
How To Calculate the Upper Bound Estimate on After Tax Real Mortgage Rates
One Year Ahead Inflation Expectations Continue to Decline
As of today:
How Well Does a Naive Expectations Augmented Phillips Curve with Cost Push Shocks Fit PCE Inflation?
I asked this question of myself, as I prepared my lecture notes. As it turns out, not too badly, over the 1986-2022 period.
White House on Revising Guidance on “Regulatory Analysis”
Otherwise known as Circular A-4. dated April 6, 2023.
Is the Lagged One Year Inflation Rate a Good Predictor of Five Year Ahead Inflation?
Answer: No.
“After tax mortgage rates are well below inflation—IOW negative real rates. A helluva deal!”
Contra this comment, the data suggests otherwise.
Remembering the 2022H1 Labor Market Collapse Hypothesis
Mr. Steven Kopits asserted that the Philadelphia Fed’s early preliminary benchmark supported a recession in 2022H1, to wit:
You, Menzie, held the Est Survey was more likely right. You wrote: So: (1) I put more weight on the establishment series, and (2) the gap between the two series is more likely due to increasing, and biased, measurement error in the household series, rather than, for instance, primarily increases in multiple-job holders. https://econbrowser.com/archives/2022/12/the-household-establishment-job-creation-conundrum
Dead wrong, as it turned. And predictably so.
You were wrong because you did not consider the statistics more holistically. That’s the learning point for your students. Cross check your indicators if you have dials which are telling you different things. If jobs are increasingly rapidly, then GDP should also be up. If jobs are increasing rapidly, then mobility and gasoline consumption should also be up, because so many people need to drive to work in this country. Finally, if productivity is imploding when jobs are up, you really need to take a pause and put together some sort of narrative as to why that might be happening. It suggests something anomalous in the data which requires closer inspection.
Had you done that, Menzie, you might have concluded as did the Philly Fed…
What remains of that hypothesis? Well, on March 16th, the Philly Fed released this update.
Nonfarm Employment Rises
In line with expectations.